The New York City Budget

Last updated March 22, 2014

Overview

The New York City budget reflects not only spending priorities, but a vision for the city over a fiscal year and beyond. A fiscal year, or financial year, is a 12-month period used for financial statements that often differs from the calendar year. NYC’s fiscal year runs from July 1st to June 30th.

The NYC Budget Process

The mayor submits the Preliminary Budget - a projection of the mayor’s spending priorities and agenda - to the City Council no later than January 16th for the proceeding fiscal year.

Between January 16th and the end of March, the City Council holds hearings and reviews the preliminary budget submitted by the mayor. The council has the authority to investigate expenditures and make changes to the budget.

At the end of March, the City Council issues its Preliminary Budget Response with changes to the mayor’s proposal.

By April 26th the mayor submits his Executive Budget, a revised version of the Preliminary Budget Response.

The City Council can make changes to budget priorities and conditions of expenditures before adopting the fiscal year budget by July 1st, which begins the next fiscal year.

An in depth explanation of the budget’s process and components can be found here.

The Mayor’s Role in Forming the New York City Budget

The mayor is responsible for developing Revenue, Expense, and Capital Budgets, as well as their accompanying financial plans. The mayor is also charged with implementing each year’s Adopted Budget. The Mayor’s Office of Management and Budget determines budget estimates by estimating spending and revenue, and proposes budget modifications over the course of each fiscal year. To pass a budget, the mayor works closely with the City Council, which reviews the mayor’s proposals and votes on the final version.

The mayor must deal with competing demands for public goods and services from various interest groups and communities while simultaneously balancing the budget, which is required by law. Throughout the year, the Mayor is responsible for proposing revisions to the budget to the City Council, based on new economic realities and unforeseen spending, such as aid after a natural disaster like Sandy.

Demands and Challenges in the Budgeting Process

Money needed for education, sanitation, public safety, libraries, social services, housing and economic development must be raised through a variety of taxes and other revenue streams, such as city licenses and taxes. Long term capital projects, like infrastructure improvements, can be paid for by the issuing of municipal bonds. The mayor must propose taxes that incentivize growth and investment, while also raising the necessary funds to pay for the city’s expenses. There is a trade-off involved in creating the Expense and Capital budgets; money spent servicing long-term debt to fund capital projects must be accounted for in the annual expense budget, and cannot be used on desired short-term public services.

The FY 2014 Budget

Mayor Michael Bloomberg’s twelfth and final budget for the fiscal year (FY) 2014 of $70 billion did not raise taxes and, because of higher than anticipated revenue, avoided expected cuts to fire companies and after-school programs.

The budget contained a quarter of a billion dollars for protecting coastal areas, which suffered immensely from Hurricane Sandy, as well as $58 million for the New York City Housing Authority, which had lost funding because of the federal sequester. The budget forecasted a $2 billion deficit in 2015, and left unaddressed the issue of expired government labor contracts. The Independent Budget Office (IBO), the publicly funded independent organization tasked with evaluating various budget proposals, released its guide to understanding the city’s budget in June 2013.

Mayor de Blasio’s Preliminary FY 2015 Budget

On February 12, 2014 Mayor de Blasio announced his Preliminary FY 2015 Budget of $73.7 billion. Mayor de Blasio was faced with addressing the problem of expired labor contracts that Mayor Bloomberg’s final budget did not tackle. 152 labor contracts covering 300,000 city employees have expired; unions are demanding $7.8 billion dollars in back pay for employees who have not had pay raises in three or four years. Mayor de Blasio was also faced with restoring the Retiree Health Benefits Trust Fund, which had slowly been depleted since 2010 by the Bloomberg administration. Mayor de Blasio also had an almost $2 billion surplus to allocate in this years fiscal budget from the FY 2014.

The FY 2015 preliminary budget aims to fund initiatives essential to the administration such as universal pre-kindergarten, a NYPD inspector general, implementations of the Paid Sick Leave Act, and increasing homelessness and mental health services. The proposal allocates $14 million for initiative reforms for the FY 2014 and $26 million for FY 2015. The preliminary budget also sets aside $730 million for the unresolved labor contracts. The budget projects a $1.1 billion deficit for FY 2016.

“Budget Dance” Reform

Former Mayor Bloomberg had been harshly criticized for his “budget dance” in the past for continuously cutting and placing at risk funds for city public services. Mayor de Blasio has claimed that his FY 2015 budget focuses on “putting an end to the cynical budget dance” of the Bloomberg administration.

City Contracts and Negotiations

While Mayor de Blasio has criticized the Bloomberg administration’s neglect of over 150 unresolved labor contracts, his FY 2015 preliminary budget did not allocate any specific funds for the union contracts. De Blasio claimed he failed to allocate specific funds for the unresolved contracts because of the necessary negotiations required to solve the issue.

Taxes

Mayor de Blasio has proposed a .0534 percent personal income tax increase for households earning more than $500,000 per year. The tax increase will be used to fund the $530 million dollar universal pre-kindergarten program and other school programs. Governor Cuomo has proposed using state funds for the project instead. As negotiations unfold, it appears likely that NYS government will not empower de Blasio to raise the tax, but will provide funding to expand pre-kindergarten in NYC and perhaps across the state.

Participatory Budgeting

Mayor de Blasio’s proposal plans to expand participatory budgeting throughout NYC (PBNYC) in an effort to increase government transparency and democratic involvement by engaging constituents in the budget process. Mayor de Blasio has been an advocate for PBNYC and has allowed for nearly $10 million to be allocated by 13,000 New Yorkers throughout eight City Council districts.

In assessing the expansion of participatory budgeting between years 1 and 2, the Urban Justice Center found that participation in the PBNYC process increased, but attendance at the neighborhood assemblies diminished, and that more work will need to be done to ensure past participants re-engage in the process.

Key Questions to Consider:

How will the next wave of New York City government officials approach the budget deficit?

How will the next mayor of New York City negotiate with the city labor unions and how will the next union contracts with the city be structured? Will the contracts include “back pay” for union employees?